YouTube's row with PRS for Music, the body representing composers and publishers, could threaten the launch of other new online music services, digital media experts warned on Tuesday.
Google, which owns the online video site, has blocked all music videos to UK viewers after it failed to agree "economically sustainable" fees with PRS.
Giving evidence to MPs on Tuesday, Lord Carter, the communications minister, agreed with suggestions from other online music services that the dispute could foreshadow more rows over how to price content.
Ministers are planning to establish a rights agency to bring together holders of copyright and content distributors, such as internet service providers. "We clearly need some legislative backstop for the protection of rights," said Lord Carter. "In addition we need a mechanism for the distributors and rights owners to work out new business models for how rights get priced and accessed in a digital world."
He added the YouTube/PRS dispute demonstrated how difficult it was to create such business models.
BSkyB and MySpace are two media companies now in negotiations to launch new music services. Websites such as Last.fm, 7Digital and Spotify have bemoaned the difficulty in working with the music industry to launch new business models.
Martin Stiksel, co-founder of website Last.fm, said: "We are obviously watching the outcome of this discussion very closely. Online music is not a burgeoning industry any more, I would have thought it would become more transparent by now. But it is getting more expansive and prohibitive for new services to get into market. That is going to stifle innovation. The entry stakes have been massively raised all around." He said that although it was now harder for legal sites to compete with pirate ones, PRS was more progressive than other European Union agencies.
Paul Jones, partner at Harbottle & Lewis, the media law firm, said Google's move might be just a negotiating ploy, but added: "Services are not getting launched because people cannot agree rates."
Andrew Shaw, managing director for broadcast and online at PRS for Music, said it was more forward-looking than other rights agencies. "Sometimes licensees use complexity as an excuse for not wanting to do the right thing, which is returning royalties to the rights holders," he added.
Standard licensing terms charge for each time a music video is shown, irrespective of any advertising revenue. If Google feels its rates were now uneconomical, Mr Shaw said, "I can only expect that their revenues have not increased at the same rate" as its traffic had.
Record labels will lose out because of Google's action, he added, which means it might expect their support in pushing the PRS to licence videos on YouTube.
Google and online services such as Hulu are in negotiations with record labels about creating new websites.
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